Estate planning is a legal consideration that many people overlook or willfully ignore until much later in their lives. In short, an estate plan is a legal document that spells out what you want to happen to the things you own after you die.
Because the topic can be difficult and/or unpleasant to think about, many people wait until the last minute to start putting together an estate plan. In the worst case scenario, having no formal estate plan means close friends and family are left to sort through all the complexities of distributing the estate themselves.
If your estate is considerable, and you pass on without an estate plan, you could unintentionally be leaving behind a tremendous amount of work and potential legal conflict for your family.
What Constitutes Your “Estate?”
From a legal perspective, your estate is made up of all of the following things:
- Real estate holdings (including your home)
- Bank accounts
- Stocks, bonds, and other securities
- Your life insurance policy
- All personal property (cars, jewelry, artwork, furniture, etc)
Basically, if you own it, it’s considered part of your estate.
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What Does An Estate Plan Do?
The general goal of an estate plan is to formally provide instructions for how you want all the various pieces of your estate to be distributed after you die.
If, for example, you wanted to give some of your money to charity after you pass on, your estate plan would specify which charity to give the money to, and how much they should receive.
Other functions of an estate plan include:
- Specifying which people (if any) you want to receive part of your estate after your death, as well as how much each person you’ve specified should get.
- Minimizing the amount of taxes that will need to be paid before your estate is transferred over to your beneficiaries.
- Providing instructions for your funeral and any other arrangements you wish to be made after you’re gone.
Another important function of an estate plan is to provide instructions to your family and/or friends regarding medical treatment and care if you should become unable to make those decisions for yourself before you die.
How Is Estate Planning Different Than A Will?
In many cases, the terms “will” and “estate plan” are used interchangeably. From a legal perspective, your will is a component of your estate plan, which includes other items like medical care instructions and instructions for funeral arrangements.
It’s common for people to think that a will is the only legal document they’ll need before they die. And while having a will is certainly helpful, having a complete estate plan that covers other important considerations will help those inheriting your estate make the transition more smoothly.
Do I Need A Lawyer’s Help?
We’ve all seen movies or books where a character hastily scribbles a last-minute will on the back of a napkin and leaves everything to some mystery beneficiary that their family has never heard of.
While such scenarios make for entertaining fiction, the legality of such a document would be questionable in even the best case. If you want to ensure that your estate is distributed the way you desire, don’t write it down on a spare notepad and assume it will stand up to legal scrutiny if any of your family members decide to challenge it.
Even if your estate is fairly modest, having an experienced estate lawyer to help you draft an estate plan will be an immense help. Not only that, but you’re likely to find greater peace of mind knowing that, when the time comes, everything is clearly laid out and there will be no legal hurdles for your beneficiaries to jump through before your estate is distributed.